National Monetisation Pipeline

National Monetisation Pipeline

News: Recently, the Centre has decided to conduct an Asset Recycling Drive under the National Monetization Pipeline (NMP).

What is Asset Recycling Drive?
• Asset Recycling Drive, also known as Asset Recycling, is a strategy used by governments to fund infrastructure projects and drive their Environmental, Social, and Governance (ESG) objectives.

How does it work?
• Monetization of Existing Assets: Governments concession out or lease existing, revenue-generating public assets, such as toll roads, airports, ports, rail, and electricity transmission assets. These are often referred to as brownfield infrastructure assets.
• Investment in New Assets: The proceeds from the monetization are then invested into building new, sustainable greenfield infrastructure assets.

What is National Monetisation Pipeline?
• The National Monetization Pipeline (NMP) is a strategic initiative launched by the Indian Government to monetize brownfield infrastructure assets.
• The NMP estimates an aggregate monetization potential of Rs 6.0 lakh crores through core assets of the Central Government over a four-year period, from FY 2022 to FY 2025.
• The NMP aims to unlock value in brownfield projects by engaging the private sector, transferring to them revenue rights and not ownership in the projects
• The plan aligns with the Prime Minister’s strategic divestment policy, under which the government will retain presence in only a few identified areas with the rest tapping the private sector.

How does NMP benefit the Indian economy?
• New Revenue Sources: Asset monetization creates new revenue sources for public-sector organizations. Many of these public-sector organizations’ assets are underutilized and therefore failed to generate adequate revenues.
• Effective Use of Resources: Monetization of underutilized public investments will help Public Sector Undertakings (PSUs) get financial resources and, in the long term, will lead to more effective use of these resources.
• Increased Productivity and Employment: Private owners increase productivity and decrease expenses. This scale impact of privatization will likely increase the volume of productive employment.
• Improved Services: There will be a higher level of automation which will result in improved and quality services to customers.
• Revitalization of Economy: As the private sector is able to produce more resources (assuming they will get management control), the economy will be revitalized, and revenues from monetized assets will contribute to the construction of new infrastructure and the complete recycling of future assets.
• Sustainable Infrastructure Financing: The NMP is aimed at tapping private sector investment for new infrastructure creation. This is necessary for creating employment opportunities, thereby enabling high economic growth and seamlessly integrating the rural and semi-urban areas for overall public welfare.

What are the challenges associated with National Monetisation Pipeline?
• Deficiency of Identified Revenue-Generating Ways: There may be a deficiency of identified revenuegenerating ways in various assets, hence investment in them may end up in losses.
• Profit Motive vs Public Service: When private players begin operations, their project plan is to make a profit, while when the government offers the service, the goal is to give excellent services to the public.
• Capacity of Indian Private Sector: There is also a question about the capacity of the Indian private sector to invest at this juncture, and most probably, the investment will go to entities outside the country.
• Risk of Monopolization and Inflation: The asset monetization would likely result in monopolization and inflation due to the disinvestment of critical infrastructures. Disinvesting in critical assets like airports, energy, railways to private players would cause end consumers to be at the mercy of such entities.